Rightmove slumps on Google fears, but banks stay buoyant

Thursday 3 December 2009 11.57 EST
First published on Thursday 3 December 2009 11.57 EST

Rightmove was one of the biggest fallers of the day, down more than 10% on fears that Google would turn its attentions to the UK property market.

Reports that the US group was talking to British estate agents about launching a portal similar to one it has already set up in Australia unnerved Rightmove's investors, and the property website's shares closed 57.6p lower at 499.90p. Analysts were less worried, with company broker Numis and WH Ireland both issuing buy notes and playing down the competitive threat. Numis said:

In our view, Rightmove has a firmly established position as one of the UK's leading websites and has a commanding share of more than 80% of the four leading property portals. The value added by Rightmove in generating leads is clearly proven, and the cost of the product is a small component of an estate agent's cost base and remains modest in comparison with newspaper advertising.

We note that Rightmove has proven effective at defending its market position against Globrix/NewsCorp, Prime Location/DMGT and Tesco. We believe that Rightmove's market position is secure, and have been encouraged by the group's recent initiatives to drive display advertising . We retain our buy recommendation and would view any near-term impact on the shares as a buying opportunity.

Meanwhile Eric Burns at WH Ireland said:

Clearly having the might of Google behind it will make this latest threat appear more credible. Nonetheless, we view any suggestion that agents will desert Rightmove en masse in favour of a yet to be proved portal as nonsense. The one possible negative of this latest development would be if agents use their position to restrict the extent of monthly price increases thus acting as a brake on future average revenue per account growth. This, however, is unlikely to have any bearing on market expectations until 2011 at the earliest and, even then, any impact is likely to be modest.

Whilst short-term price weakness can be expected as the story gains traction, we believe fears over the Google threat are overblown and would use this as an opportunity to enter the stock. We retain our buy recommendation with a 650p price target.

Overall, in a volatile day, the FTSE 100 finished down 14.39 points at 5313.00. Wall Street also made an erratic start, buoyed by lower than expected weekly jobless claims but unsettled by a poor service sector survey. Economists said the survey suggested tomorrow's non-farm payroll numbers could be worse than the forecast fall of 125,000-130,000.

Banks made headway, helped by news that Bank of America planned to pay back $45bn of taxpayer loans, but mining companies fell back as investors shied away from the sector and commodity prices edged lower. Joshua Raymond, market strategist at City Index said:

The [Bank of America] move is a strong sign of confidence by the US bank that they are ready to return to normality and boosts hopes that a number of other major US banks such as Citigroup could be set to follow suit.

So Royal Bank of Scotland rose to the top of the FTSE 100 leaderboard, up 1.575p at 35.125p, while Lloyds Banking Group was lifted 2.35p to 55.45p and Barclays was 7p better at 304.5p.

But Xstrata fell 44p to £11.04 after the first of two investor days this month, while Rio Tinto lost 108.5p to 3183.5p.

Satellite broadcaster BSkyB dropped 8.5p to 543.56p as executive Brian Sullivan was named as the new chief executive of struggling Sky Deutschland, starting next year. At the same time Virgin Media said it expected Ofcom to ask Sky to cut the prices it charges rivals for films and football by the middle of next year.

Marstons, the pubs and brewing group, added 3.2p to 93.1p following well received full year results, helped by growing food sales. The company plans to build 60 large, food-led pubs over the next three years.

Lower down the market, Amerisur Resources rose 1.125p to 10.75p after a positive update on its operations in Colombia.

Finally Ultima Networks, an AIM listed green technology company, added 0.5p to 1.625p as it raised £1m with a placing at 1.4p a share. The proceeds will be used to develop its solar park operations in Italy.